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Business Credit Scores and Reports

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Interested in growing your small business?

If so, you have most likely thought about accessing additional funding to help make your business dreams a reality. In fact, it is quite common for small business owners to expand – with the help of strong business credit scores.

A crucial aspect to understand about a business’s credit health, is that credit scores impact the credit that is available to a business, as well as the terms—such as the interest rate—that lenders offer. 

Establishing good credit scores is vital because not only do banks rely on good business credit scores for establishing lines of credit, but most suppliers examine a business’ credit profile before offering any type of funding or business loan options. As a result, having good credit makes it much easier for entrepreneurs to negotiate for better terms.

It is important to note that it typically takes about one to two years to establish – and improve – business credit history. While it is definitely possible for business owners to improve their credit scores, they can’t directly change them because they are administered by external rating agencies.

Because so many entrepreneurs find business credit scores and reports to be a confusing topic, we have answered many common questions below to help you grasp the ins and outs of business credit:

What Exactly is a Business Credit Score?

A business credit score is a specific number that signifies the likelihood that your business will be approved for funding. Personal credit scores range from 300 to 850, and most business credit scores range from zero to 100.

Keep in mind that while most business credit scores range from zero to 100, the Small Business Administration (SBA), banks, suppliers, and other business lenders commonly require a minimum business credit score of 75 to receive any funding. However, there are some lenders who sometimes consider lower scores when the business applying is a small business or a startup.

While individuals can view their personal credit score for free using numerous sources, there are only a small number of sources available for credit monitoring your business credit file. The main business credit reporting agencies include Dun & Bradstreet, Experian, and Equifax—and can provide your score for a fee.

In addition, FICO scores, the credit scores created by Fair Isaac Corporation, are widely used. FICO scores are calculated based on information in a consumer’s credit report, which is maintained by the Experian, Equifax, and TransUnion business credit bureaus. FICO scores for small businesses are known as “FICO SBSS.” The minimum FICO score to pass the Small Business Administration’s pre-screening process is 140. Below is a chart outlining each reporting agency’s score range:

Business credit scoreScore range
Dun & Bradstreet PAYDEX Score0 – 100
Intelliscore℠ Plus from Experian0 – 100
FICO® LiquidCredit® Small Business Scoring Service℠0 – 300
Equifax Business Delinquency Risk Score224 – 580

Should I Review My Business Credit Reports?

It’s a very good idea to check your business credit reports regularly (once every quarter) to keep track of the information that lenders and service providers will see once they purchase your report.

Many business owners admit to now knowing their business credit scores, but keeping track of this information is vital. For example, what happens if your business credit gets confused with another business? Or one of your lenders reports incorrect information? Or what happens if identity theft results in negative information on your reports? By regularly monitoring your credit, you can stay abreast of any suspicious activity.

Even if your business credit score is high, you should monitor changes because it definitely affects the creditworthiness of your business. If you do find and report an error, it may take several weeks or even months before the various reporting agencies completely remove those errors from your record.

Should Business Owners Separate Personal and Business Credit?

Many small business owners do not mix personal and business credit because a poor business credit score can negatively affect your personal credit score and vice versa. As a result, establishing a separation between personal finances and business finances is critical when trying to protect your own assets and credit.

Is it Important to Establish a Business Credit Score Immediately?

It is common for many brand new entrepreneurs to rely on their personal credit and assets for initial financing. However, it makes good financial sense to quickly establish a business credit score as a way to limit personal exposure. In order to accomplish this, use business credit cards for business expenses and never combine personal and business credit cards. Always maintain separate financial records, tax details, and insurance coverage. In fact, some entrepreneurs opt to use separate banks for their business and personal finances.

What Influences My Business Credit Score?

There are several factors that can affect a business credit score, including the following:

The life of your business: The longer you have been in business, the higher your credit score will be.

The strength of your revenue: Typically, if your business is bringing in revenue, your score will be higher.

The power of assets: If you have assets, such as property, your credit score will likely be higher.

The importance of keeping debts and credit utilization to a minimum: Paying off debts with on time payments can positively impact your credit score and help you get approved for a loan. 

A positive loan payment history: Many banks examine the loans you have had in the past, their value, and how quickly you paid them off.

A clean public record:  Any reports detailing liens, bankruptcies, and judgments against you may negatively affect your business credit score.

How do Lenders Actually Use Business Credit Scores?

Small business lenders decide whether to grant loans to small businesses based on the business credit scores they receive from multiple credit rating agencies. In addition, a business credit score can help lenders decide on the appropriate size of a loan. Some important factors used by lenders include your previous debt repayment track record, how quickly you pay suppliers and vendors, and your revenue over time.

Simply put, high credit scores usually translate into a reliable and strong business that has been regularly paying off debts, while low credit scores can mean an untrustworthy or financially unsound company. Lenders want access to as much historical information on a business before making any lending decisions. And lenders commonly consider both personal credit scores and business credit scores to make these important decisions.

Business credit reports provide you with a glimpse of your credit status, as well as what creditors see when they make decisions on whether to lend you money. Maintaining strong credit scores and understanding exactly what is on your small business credit report is an essential part of operating your business.

Get started by forming your business online.  Then we can work with you to establish and build your business credit.  We’re here to answer your questions and guide your business to success. Form your free LLC today! 

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